With the growing internationalization of business crime, the question of when a foreign national may be extradited to the United States for crimes charged in the United States is arising more frequently. Generally speaking, under the requirement of "dual criminality," a resident of a foreign country charged in the United States will not be extradited if the country he is residing in does not deem his conduct criminal. If, however, that person travels from his "safe haven" home country to another country (even in transit) where such conduct is criminal, he may be extradited.

As reported in a recent Wilmer Hale article, see here, Romano Pisciotti, an Italian citizen charged with an antitrust bid-rigging violation in 2010, this April was extradited from Germany after the connecting flight on his trip from Nigeria to Italy landed there. Germany generally criminalizes bid-rigging; Italy generally does not. Presumably, had Pisciotti not left Italy, he would not have been arrested.

Pisciotti's extradition demonstrates that foreign residents indicted in the United States who are not extraditable from their home country (some nations, like Germany, will not extradite its own citizens other than to another European Union country or the International Criminal Court, for instance) take a considerable risk whenever they travel away from their country of residence.

DOJ reports their first ever extradiction on an Antitrust charge. (see here). The accused is charged with violating the Sherman Act. The company where the excutive had worked was in Italy, but the arrest and extradition was from Germany. Obviously, the individual is presumed innocent and the Government will bear the burden of proving guilt.

Yesterday, in U.S. v. Under Seal (4th Cir. 2013), the Fourth Circuit, joining several other federal circuits, extended the Fifth Amendment's Required Records Exception to records of foreign bank accounts required to be maintained pursuant to the Bank Secrecy Act ("BSA"). John and Jane Doe received a subpoena to turn over records of their Swiss bank accounts. They responded that complying with the subpoena compelled them to testify against themselves, as they were required to create and maintain such records pursuant to the BSA. They also argued that the long-standing, judicially-created, Required Records Exception did not apply in this case, because the BSA's record-keeping provisions are essentially criminal, rather than regulatory, in nature. The district court disagreed, the Does took civil contempt, and an appeal ensued. Unsurprisingly, the Fourth Circuit sided with the government, accepting its argument that the BSA's record-keeping provisions are essentially regulatory in nature. You are shocked? There's not exactly a strong constituency, public or judicial, for foreign bank account tax evasion.

At the ABA Antirust Spring Meeting in Washington DC, Assistant Attorney General for the Antitrust Division William Baer announced a significant change in the Division’s practice of carving out of individuals from the non-prosecution protection offered in corporate plea agreements. Depending on circumstances, the Division may be willing to enter into a plea agreement with a corporation and provide non-prosecution to some, but not all, of the corporation’s executives. The Division may reserve for prosecution (carve-out) some executives it thinks are culpable, or others it whose conduct doesn’t warrant prosecution, but the individual(s) declines to cooperate. The most contentious part of the carve-out practice was that the Division would name these individuals in a public plea agreement. This could smear an executive’s reputation by signaling that they were involved in criminal conduct, but provide no way for them to clear their name. Courts upheld the practice as legal, but one court found the Division's policy "unappealing," "offensive" and a “perp walk.”

Check out Daniel D. Sokol's new article titled, Cartels, Corporate Compliance and What Practitioners Really Think About Enforcement available here and to be appearing in the Antitrust L.J.

The SSRN abstract states:

This article shows the limitations to the optimal deterrence-inspired cartel enforcement policy currently used by the Department of Justice Antitrust Division. This article employs both quantitative and qualitative survey evidence of cartel practitioners to shed light upon the realities of US cartel enforcement policy. The empirical evidence provided by the practitioner surveys challenges the traditional assumptions behind the success of the DOJ’s cartel program. Perhaps the most interesting finding is that firms regularly game the leniency program to punish their competitors. For various reasons, firms and the DOJ have strong incentives to settle rather than to litigate cases in which the legality of cartel conduct may be in doubt. The surveys also expose limitations to the optimal deterrence framework for firms and individuals regarding incentives and behavior. These findings suggest the need for an enforcement focus on sub-units within the firm as well as various processes to change behavior that would improve enforcement and deterrence. Finally, the surveys suggest certain structural limitations in organizational behavior within firms that have prevented antitrust compliance programs from becoming embedded in a way that would reduce cartel activity. Additionally, this article provides an analysis of media coverage of cartel enforcement from 1990-2009. The analysis suggests that successful enforcement has not created sufficient awareness of cartel behavior among the public. Relative to other types of financial crimes, such as accounting fraud, the public seems unaware or uninterested in cartel activity. The conclusion summarizes the article’s findings and outlines potential future steps in cartel research."

The media is reporting that Apple and others have a lawsuit filed against them by the Department of Justice for alleged price-fixing, violations under Section 1 of the Sherman Act. (see here, here, and here). The Department of Justice Antitrust Division website has an Antitrust Primer here. It states:

"Price fixing, bid rigging, and market allocation are generally prosecuted criminally because they have been found to be unambiguously harmful, that is, per se illegal. Such agreements have been shown to defraud consumers and unquestionably raise prices or restrict output without creating any plausible offsetting benefit to consumers, unlike other business conduct that may be the subject of civil lawsuits by the federal government."

In the Northern District of California, the court in United States v. Au Optronics Corporation, et. al (AUO) was faced with the question of whether Apprendi applied to criminal fines that the government was seeking under the alternative fine statute, 18 U.S.C. s 3571(d). The company and nine individuals were charged with price-fixing in violation of the Sherman Act. A Superceding Indictment claimed that the government would seek a criminal fine against the corporate defendants (not the individuals) under the alternative fine statute, which would mean that "the government could seek a fine in this case of up to $1 billion against AUO." The government sought bifurcation into separate guilt and penalty phases and also sought an "order that the evidence presented in the penalty phase need not be presented to a jury." In essence they were arguing that Apprendi did not apply here.

The court saw it differently then the government. Initially two circuits had found that Apprendi applied and even a declaration of the antitrust division had said it was applicable with fines. Then came the case of Oregon v. Ice, where the Court held "that a judge could impose consecutive sentences without any jury findings beyond those of guilt." Following this decision, the First Circuit found that criminal fines were exempt from Apprendi.

The government argued here that the First Circuit decision should be followed because "under historical practices fines fell within the sole discretion of the trial judge."

The problem for the government, however, is that they were relying on dicta from the Ice case. Thus, the court in AUO held that Apprendi's mandate applied here. Hon. Illston states, "[t]he magnitude and primacy of such punishment puts it in a separate class from an ordinary criminal fine imposed against a defendant who faces incarceration." (the government was seeking a fine that could amount to $1 billion, which is "ten times more than the fine authorized by the Sherman Act")

The court also denied the government's request to bifurcate the trial into a guilt phase and penalty phase, stating that "the Court is disinclined to bifurcate without a more substantial showing that a separate penalty phase will save judicial resources."

Ms. Levin began by referencing the concerns expressed yesterday regarding the trend towards cooperation by corporate counsel. She indicated this has been driven, in part, by the Anti-trust Division’s amnesty program and DOJ’s aggressive marketing thereof. She reviewed the requirements of eligibility for the amnesty program: first to approach DOJ; prompt and effective action to terminate the wrongful conduct; full, continuing and complete cooperation; it must be “a true corporate act”; restitution must be made if possible; the company cannot have been the architect of the scheme, and cannot have coerced the others.

The benefits of the amnesty program include: the company receives complete protection from fines; no jail or fines for employees; no joint and several liability exposure in the subsequent civil actions; and no treble damages. Potential pitfalls include the following: the agreement only binds the Antitrust Division; a failed application, which can result in a prosecution using the information provided during the application process; “Amnesty Plus”, a program giving a break to companies which are not first in reporting to DOJ if the company reports additional violations, but which can lead to new grand jury investigations; and the use of amnesty as an anticompetitive tool, i.e., a way to cause headaches or worse for a company’s competition.

Mr. Gergen noted pending litigation in which the government has asserted that an employee may not seek to enforce the amnesty agreement.

To facilitate discussion of these problems and how they apply in real-world settings, the panel reviewed a number of cases in which a successful defense was mounted against leniency application prosecution.

Mr. Deane compared antitrust defense to white collar defense generally. He analogized the amnesty program to “proffering” in other white collar cases, noting the differences – particularly as it results in tension between the goals of corporate counsel and the interests of the individuals involved, and the potential conflict between such goals and a joint defense agreement.

Ms. Nall discussed endgame negotiation strategies. She noted that positioning a client is very fact-specific, but some general principles do apply. For example, cooperation is always viewed favorably by the government. She cautioned that DOJ views with great disfavor the argument that a defendant should be treated with leniency because the defendant is foreign and doesn’t understand or isn’t familiar with American antitrust laws. Legal arguments (regarding jurisdiction, for example) may also be strong bargaining chips. Mr. Grannon suggested jurisdiction may provide a defense at trial as well.

Mr. Grannon also discussed the decision making process involved in evaluating a plea offer. These decisions often take place after a company has received amnesty, your client’s company has pled guilty, and your client has been left as a “carve-out.” Mr. Grannon presented data on sentences for defendants, comparing different kinds of defendants and providing examples from specific cases. He noted that DOJ indicates that “no jail” pleas are no longer an option. He noted one particularly troubling DOJ strategy as follows: DOJ has a Memorandum of Understanding with Immigration, indicating that Sherman Act violations are crimes of moral turpitude – which results in deportation and exclusion for 15 years. This agreement exists despite a strong argument that it is not a crime of moral turpitude as that term is commonly defined. DOJ will use this threat as a bargaining chip, agreeing to waive the application of the Memorandum of Understanding it has with Immigration in exchange for a plea of guilty.

Why is it that the headlines tend to focus on the conviction and not the counts that did not result in a conviction (although it is noticed that ABC News did not do this). Was this long investigation and trial worth it? Is this how our tax dollars should be spent?

A DOJ press release, tells that "[a] Taiwan thin-film transistor-liquid crystal display (TFT-LCD) panel producer and seller has agreed to plead guilty and to pay a $30 million criminal fine for its role in a global conspiracy to fix the prices of TFT-LCD panels. . ." The press release states:

"According to a one-count felony charge filed today in U.S. District Court in San Francisco, HannStar Display Corporation, based in Taipei, Taiwan, participated in a conspiracy from Sept. 14, 2001, to Jan. 31, 2006, to fix the prices of TFT-LCD panels sold worldwide. According to the plea agreement, which is subject to court approval, HannStar has agreed to cooperate with the department’s ongoing TFT-LCD investigation."

DOJ notes that this investigation so far has resulted in 17 executives being charged and "seven companies have pleaded guilty or have agreed to plead guilty and have been sentenced to pay or have agreed to pay criminal fines totaling more than $890 million."

A DOJ Press Release reports that "Epson Imaging Devices Corporation (Epson) agreed to plead guilty and pay a $26 million criminal fine for its role in a conspiracy to fix prices in the sale of Thin Film Transistor-Liquid Crystal Display panels (TFT-LCD) sold to Motorola Inc." It also states that "[a]ccording to a one-count felony charge filed today in U.S. District Court in San Francisco, Epson, a subsidiary of Seiko Epson Corporation, participated in a conspiracy to fix the prices of TFT-LCD panels sold to Motorola for use in Razr mobile phones from the fall of 2005 to the middle of 2006. According to the plea agreement, which is subject to court approval, Epson has agreed to cooperate with the Department’s ongoing antitrust investigation." It is a common practice for companies to plead guilty and cooperate in the investigation of individuals. Many a plea or deferred prosecution agreement with a cooperation clause has led to later indictments of individuals within or associated with the company.

The Epson Imaging company website acknowledges this agreement (see here) and states that "[t]he United States Department of Justice has been investigating the pricing practices of the world’s major TFT-LCD manufacturers since December 2006, and Epson Imaging has fully cooperated in this investigation. After careful consideration of the law, the facts and other factors, Epson Imaging has decided that the best course of action was to conclude the agreement with the United States Department of Justice." The company also states that "In consideration of the inconvenience caused to its customers, Epson Imaging’s directors will voluntarily adjust their remuneration."

A DOJ Press Statement issued by Attorney General Mukasey speaks to the resignation of Assistant Attorney General Thomas Barnett of the Antitrust Division. AG Mukasey states:

"Tom Barnett has been an effective enforcer of the antitrust laws and a strong advocate for consumers. Under his leadership, the Antitrust Division has increased cartel enforcement to record levels with unprecedented fines and prison sentences, improved the efficiency and efficacy of its merger enforcement, and enhanced cooperation with our foreign counterparts."

The Press Release also notes that:

"Under Barnett’s leadership, the Division obtained $1.8 billion in criminal fines against 50 corporations and 91 individuals. The average prison sentence for incarcerated defendants charged by the Division reached an all-time high of 31 months in FY 2007 with an overall average of 23 months during Barnett’s 3 ½ years as head of the Division. Foreign executives in international cartel cases also faced longer jail sentences, averaging 12 months in FY 2007."

A Department of Justice Press Release reports that "[a] former manager of a West Sayville, N.Y., company pleaded guilty and has agreed to serve a jail sentence and pay a criminal fine for his role in two separate conspiracies, one to rig bids on U.S. Navy contracts for metal sling hoist assemblies and another to accept kickbacks from vendors and subcontractors." The agreement calls for a year and a day in prison, payment of a $10,000 fine and cooperation in the government's investigation.

1. A plea agreement was filed in United States v. Japan Airlines International Co., Ltd. on a Sherman Antitrust Act, 15 U.S.C. § 1, matter. The criminal fine of $110 million is offered with cooperation by the company. There are a few interesting aspects of this plea -

It actually outlines an agreed upon payment plan -

"The United States and the defendant agree to recommend, in the interest of justice pursuant to 18 U.S.C. § 3572(d)(1) and U.S.S.G. §8C3.2(b), that the fine be paid in the following installments: within thirty (30) days of imposition of sentence -- $20 million; at the one-year anniversary of imposition of sentence ("anniversary") -- $20 million; at the two-year anniversary -- $20 million; at the three-year anniversary -- $20 million; at the four-year anniversary -- $20 million; and at the five-year anniversary -- $10 million; provided, however, that the defendant shall have the option at any time before the five-year anniversary of prepaying the remaining balance then owing on the fine."

One can't help but think if the accountants were considering tax implications here.

It accounts for the need to secure testimony from those outside the United States -

"16. The United States agrees that when any person travels to the United States for interviews, grand jury appearances, or court appearances pursuant to this Plea Agreement, or for meetings with counsel in preparation therefor, the United States will take no action, based upon any Relevant Offense, to subject such person to arrest, detention, or service of process, or to prevent such person from departing the United States. This paragraph does not apply to an individual's commission of perjury (18 U.S.C. § 1621), making false statements (18 U.S.C. § 1001), making false statements or declarations in grand jury or court proceedings (18 U.S.C. § 1623), obstruction of justice (18 U.S.C. § 1503, et seq.), or contempt (18 U.S.C. §§ 401-402) in connection with any testimony or information provided or requested in any Federal Proceeding."

2. A DOJ/Antitrust Press Release notes that "[t]he former highest-ranking Qantas Airways Limited cargo executive employed in the United States has agreed to plead guilty, serve 8 months in jail, and pay a criminal fine for participating in a conspiracy to fix rates for international air cargo shipments."